There is good news for senior citizens who has missed the bus and had not yet bought a Varishta Bima Yojana.

The government has decided to increase the budgeted subsidy on the scheme that was initially fixed at Rs 30 crore (Rs 300 million) this year.

Top LIC officials told Business Standard that the government has agreed to increase the subsidy element for the scheme and this will allow the life insurance major to sell as many policies as it can.

Insurance sector experts said the government's decision to loosen its purse strings is no surprise given the possibility of state and national elections in the near future.

The huge success of the Varistha Bima Yojana has led the government to increase the subsidy amount of two per cent for the policies.

Life Insurance Corporation of India has sold policies worth Rs 1,500 crore (Rs 15 billion) till date from July 14 exhausting almost the entire subsidy amount that was earmarked for the scheme for the whole of 2003.

The scheme promises a return of 9 per cent and since this is not a market-related return, the Centre has assured to make good the shortfall between the promised return and the actual yield on the investment made by this corpus.

Assuming that the gap is 2 per cent, the Rs 30 crore budgeted subsidy was adequate for LIC initial targeted sale of Varistha Bima Yojana policies.

The government had announced in the budget a subsidy of Rs 30 crore towards meeting the shortfall in terms of differential between the actual yield on investment and the assured return.

The actual subsidy the government needs to shell out will be based on the valuation to be finalised of the fiscal on the basis of number of policies the public sector insurance behemoth manages to sell.

In a parallel development, the government is likely to reduce the 15-year lock in period for the scheme to 10 years or 65 years of age for an individual.

The government is considering the possibility of reducing the lock-in period either by 10 years or declaring a cutoff date of 65 years for individual availing the scheme.

Government officials said that the 15-year lock in period for the Varistha Bima Yojana was too strict a condition and it has received a lot of protest from senior citizens. This promoted the government to reconsider the lock in period and bring in some flexibility.